The Federal Reserve raised its main interest rate by three-quarters of a percentage point, to a target range of 1.5% to 1.75%, the biggest increase since 1994.
It was thought the central bank would lift the rate by half a point, but a few days before its decision data showed that America's annual inflation rate, as measured by the consumer-price index, increased to 8.6% in May, higher than had been expected.
Grocery prices were up by an average 11.9%, the biggest increase since 1979. The average price of a gallon of petrol in America has now breached $5 for the first time, up by 50% since January.
Financial markets also had to digest the Fed’s quantitative-tightening programme, which began this week. The Fed is unwinding the balance-sheet of assets it accumulated since the start of the pandemic at a much faster pace than the last time it commenced such an undertaking in 2017.
The European Central Bank held an emergency meeting after government-bond yields rose sharply across the currency bloc. The pressure on government debt came after the ECB outlined an end to stimulus measures and confirmed it would start raising interest rates next month.
Italy's bonds were under the most duress. The yield on the ten-year note rose above 4%. Japan's finance ministry and central bank issued a statement that they are concerned by the weak yen.
Despite that the Bank of Japan intervened to expand its bond-buying programme when the yield on the ten-year note again breached its 0.25% cap. The policy has driven the yen to a 24-year low against the dollar.
The S&P 500 dropped by 3.9% in a day. That meant the index was down by 22% since its record high on January 3rd, making that stretch of trading a bear market (a fall of 20% or more from the most recent peak).
The current bear market has lasted over 160 days. That is longer than the bearish 33 days over February and March 2020, but still some way behind the 517 days that ran from October 2007 to March 2009.
Cryptocurrency markets were in turmoil as more signs emerged of problems with the infrastructure underpinning digital assets. Celsius, a platform that enables its users to lend their crypto tokens for a return, stopped customers withdrawing funds.
Bitcoin shed over a fifth of its price over a few days. The value of the overall crypto market has fallen from a peak of $3.2trn in November to less than $1trn.